Last week, two independent financial advisers on Rubii looked ahead to April's Budget. Among other things, they highlighted the announcements they would like to see the Chancellor make, the announcements that are more likely to be made and the areas where the British public tend to be the least tax-efficient.
Clive Barwell of IFA firm, Paramount Group, would like to see an extension of the Stamp Duty Land Tax concessions to help stimulate the property market.
At present, the nil rate band up to £175,000 is due to expire in September of this year, and Clive urges the Government to extend this for another year. He would also like to see the nil rate band extended up to £250,000, which would be a fillip to the all-important first-time buyer.
Following the introduction of transferable nil rate bands in the area of inheritance tax, Clive would also like to see this extended to income tax allowances for couples with children, where one stays at home to bring up the children.
Breadwinners, he claims, should be able to use the unutilised portion of their partner’s personal allowance.
Although Simon Hodge of Simon Hodge Financial Planning would like to see an increase in the levels at which basic and higher rate income tax is payable, he says this is unlikely given the mess the economy is in.
However, an immediate way to reduce the cost of living and help many businesses, he argues, would be a reduction in fuel tax. Ultimately, though, he warns that this year’s Budget is likely to be a 'nothing' Budget with a couple of 'feel good' elements thrown in to win the public confidence, such as an increase to the ISA (individual savings account) limit.
Of the areas most people tend to be the least tax-efficient in, says Clive, too many of us fail to make use of the various allowances. For example, independent taxation of spouses (and civil partners) has been with us for virtually 20 years, but cash deposits all too often sit in the hands of a higher rate taxpayer despite the spouse or partner being a basic or non-taxpayer.
Similar problems arise with Capital Gains Tax, where one partner incurs a liability while a spouse or civil partner’s allowance remains unutilised.
Simon, meanwhile, warns that many people are tax-inefficient in most areas of tax planning, mainly because their professional advisers are very cautious when it comes to giving advice in this area for fear of changes in legislation making their advice invalid.
But if there is one area where people get tax wrong the most, he says, it is IHT - protecting the family home, their pension funds and investments. For example, people should keep their eye on such things as the 35% tax payable if a pension fund is paid out as a lump sum on death.
Something people should expect in the not too distant future, concludes Clive, is an increase in VAT to 20% when the current, ill-advised temporary reduction comes to an end. Simon, meanwhile, wouldn’t be surprised to see an increase in the rate of fuel tax given that prices have come down.
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